Operating cost rise drives Olam disappointment: JP Morgan

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: JP Morgan Chase

Price Call: HOLD

Target Price: 2.10

Olam’s higher operating overhead is driving the earnings disappointment, JPMorgan says. After adjusting for a change in biological gains’ tax inclusion, it notes FY12 recurring net profit was $289 million, 6% below its expectation, even as net contribution was 5% above the house’s expectation.

“The steep increase in labor costs and other operating expenses (initial costs for expansion of business platform), drove the earnings miss.”

It cuts its FY13 earnings forecast by 10%, lowering its target to $2.10 from $2.30. It keeps a Neutral call. The stock is down 2.3% at $1.945.